By Case Management
Credit insurance refers to an insurance policy (such as a life insurance policy, disability and dread disease policy, retrenchment policy, salary protection policy etc.). Such insurance is taken out by a consumer to compensate a credit provider if the consumer is unable to repay a loan due to, among other reasons, death, disability, unemployment, or retrenchment. In addition, a credit provider is entitled to require a consumer to maintain a credit life insurance policy during the term of the credit agreement to ensure that any outstanding loan amount will be settled should something happen.
Credit life insurance was largely unregulated by the National Credit Act, No 34 of 2005 (NCA) until 9 February 2017, when the Minister of Trade and Industry published the final Credit Life Insurance Regulations (Regulations) under Government Gazette Notice No. 40606 of 2017. These Regulations sought to protect consumers from abusive practices that have developed over time such as selling consumers unnecessary and inappropriate insurance products and levying excessive insurance premiums without performing an accurate risk assessment of each customer.
Having said that, it is still important that those that provide financial services in respect of credit life policies ensure that they provide concise details of the material terms of a contract, to ensure that the prospective client is placed in a position to make an informed decision.
One of the main reasons for this is that credit life policies, unlike your more traditional life insurance policies, are not underwritten, which means the insurer does not calculate your premiums based on your actual risk. As a result, and to manage the risk posed, cover for preexisting conditions is excluded, and at the claims stage the insurer will check to see if your death or disability was from a pre-existing condition.
